The head of the Small Business Administration told Congress that more money is not what his embattled agency needs.
"I see a lot of opportunities to be more effective just by operating better," SBA Administrator Steven C. Preston told the House Small Business Committee during a hearing Wednesday about the Bush administration's
But Democrats on the panel were not convinced.
"I have consistently stressed the need to be realistic when we talk about resources, and this is just another example of the agency spreading itself too thin," House Small Business Chairwoman Nydia M. Velazquez, D-N.Y., told Mr. Preston.
Rep. Brady Ellsworth, D-Ind., asked Mr. Preston what he would do if he had a magic wand or a pot of gold. But the SBA chief was not biting; he said he would simply streamline the agency's operations.
"We've come a long way," said Mr. Preston, who took over the agency in July after serving in executive posts at ServiceMaster Co. and First Data Corp. "But we have a long way to go."
The president's fiscal 2008 budget would reduce the SBA's discretionary spending authority by 25.6%, to $464 million. But the agency claims its overall spending would be $814 million, after carrying over $329 million of disaster lending funds from last year and adding $21 million of reimbursable revenue.
The SBA has been criticized for its slow response to disasters such as Hurricane Katrina, and the committee has scheduled a Feb. 14 hearing on the issue. Mr. Preston is expected to testify.
Industry observers are divided over what the budget, released Monday, signals about the agency's future.
The fiscal 2008 budget is designed to support $28 billion of small-business lending, the same amount in the fiscal 2007 proposal. (That budget was never approved, and the SBA is operating under a temporary funding program.)
Of the $28 billion, the SBA's 7(a) program could guarantee $17.5 billion of loans, and its 504 program could guarantee $7.5 billion of fixed-rate loans. Another $3 billion would be used to guarantee long-term loans for venture capital investments.
The Bush administration proposes imposing new fees to make more programs self funding, including its SBA's microloan program and its Secondary Market Guarantee program for lenders who want to pool and sell loans.
The 7(a) program became fee-supported in fiscal 2005, and its loan volume has increased 25% since fiscal 2004, to 90,483, according to the SBA.
Paul Merski, the chief economist for the Independent Community Bankers of America, said the Bush administration seems to be softening its approach to the agency.
"We're encouraged that this new administration budget isn't as draconian as previous budgets, and I think it is starting to swing the pendulum back to a more robust Small Business Administration," he said.
But James Ballentine, the American Bankers Association's director of grassroots and community outreach, argued that the higher fees amount to a reduction in the agency's clout.
"You see programs such as 7(a) continuing to be in the budget. I think that is a false impression, in light of the fact that small businesses and lenders pay for the program to operate," Mr. Ballentine said.
Both trade group representatives predicted Congress would expand the SBA's budget as the overall package moves through Congress.
"There is no doubt in my mind that the chairs of the small-business committees will enhance this budget," Mr. Merski said.
